International Monetary Order Research Articles

ტრიფინის პარადოქსი ოცდამეერთე საუკუნეში

This article presents a fresh perspective on the Triffin Paradox, a concept introduced by economist Robert Triffin in the mid-20th century that continues to have a significant impact on global financial systems and policies. Despite the passage of time and the evolution of the economy, the fundamental principles of the Triffin Paradox remain relevant in today's financial discussions. The paper provides a thorough analysis of the ongoing relevance of the Triffin Paradox in the modern global economy. It draws upon historical context, theoretical frameworks, and empirical evidence to shed light on how the paradox continues to manifest itself in the current financial landscape. Specifically, it explores how the dominance of the U.S. dollar as the world's primary reserve currency perpetuates structural imbalances and systemic vulnerabilities, echoing the concerns raised by Triffin. Moreover, the paper delves into the implications of the Triffin Paradox for various stakeholders, including policymakers and central banks. It examines the challenges posed by the pursuit of domestic monetary policy objectives in an interconnected world, where the stability of the global financial system relies heavily on the stability of the reserve currency issuer. Additionally, the paper explores potential strategies for mitigating the risks associated with the Triffin Paradox and fostering a more sustainable international monetary order. By integrating insights from economics, finance, and international relations, this paper contributes to a deeper understanding of the Triffin Paradox and its enduring significance in shaping contemporary financial dynamics. It emphasizes the need for policymakers and stakeholders to address the inherent structural tensions in the global monetary system, with the goal of promoting financial stability, economic resilience, and inclusive prosperity worldwide.

The Nexus of Public Debt and Private Finance: Forging the International Monetary Order

ABSTRACT The contested alliance of state and finance embodied in public debt forms a nexus that has shaped the emergence of capitalism, and has also strengthened and transformed as capitalism developed. The state’s recourse to debt is the foundation for the emergence of a powerful financier class, but this powerful class of financiers has also come to depend on the state to provide the fodder for its continual growth. This paper investigates the key role of this nexus in constituting the international monetary hierarchy and by ordering relations between advanced capitalist countries and enforcing the financial subordination of the periphery through a comparative-historical analysis of British hegemony in the 19th century and US hegemony in the 20th century.

O capítulo da moeda baseada em reservas de commodities: Friedrich A. Hayek, John Maynard Keynes e a Ordem Monetária Internacional

ABSTRACT The frontal clash in the pages of Economica between Friedrich A. Hayek and John Maynard Keynes in 1931 was unique in scale and influence. Although this event had intense repercussions on the profession as a whole, in 1943 occurred a less discussed episode involving both men. Hayek and Keynes entered into controversy regarding the re-foundations of the international monetary order post-Second World War and the commodity reserve currency proposal. This round was somewhat neglected but is historiographically relevant since it was the only public debate with the active engagement of both sides in a professional journal after 1931. Moreover, it epitomized the personal and intellectual mature relationship of Hayek and Keynes, marked by convergence, dialogue, and friendship. This collaboration was particularly developed when the London School of Economics (LSE) evacuated to Cambridge during the Second World War and Keynes found rooms for Hayek in King’s College, Cambridge.

International clearing system as alternative monetary order

The purpose of this paper is to reconstruct the debate on the international clearing mechanism from the pioneering proposals of the nineteenth century to the years of high theory, at the beginning of the 1940s, when several plans were defined to establish international clearing mechanisms, and the well-known John Maynard Keynes’s International Clearing Union Plan was joined by other projects proposed by Paul Einzig and two German-born economists, Ernst Friedrich Schumacher and Hubert Ladenburg. As is well known, the Keynes plan was conceived as a response to the Nazi plan to establish a multilateral clearing system for regulating trade relations in the economic space of the countries occupied by the Third Reich. However, Keynes did not elaborate a plan radically opposed to the Nazi proposal, but shared its essential core. While being opposite sides of the conflict, both Nazi Germany and the British government proposed the same monetary order, based on multilateral clearing system, for the post-war world. The project of a new international monetary order based on the multilateral clearing system was not unanimously shared among the Allies: the United States moved on different lines confirming the centrality of gold in the post-war world order. Economic interests imposed the restoration of gold-exchange standard, based on the dollar supremacy and the Bretton Woods agreement, confirming the political success of Harry Dexter White’s proposal, was a turning point in a spontaneous path towards a new international order based on clearing agreements. Keynes proposed an economically realistic solution, based on the experience of clearing agreements resulting from the collapse of the gold exchange standard, but his plan was politically unrealistic in the face of the interests of the United States superpower. Keynes did not accept a compromise, but was simply defeated.

Globalna dominacija dolara na izmaku?

The paper points out that the relatively slow development of RMB as a reserve currency is taking place in parallel with the expansion of trade invoiced in the renminbi. It is argued that, even in the absence of financial liberalization, the renminbi could still become a global currency. Namely, the leading status in world trade creates the potential for creating demand and supply of renminbi. Additionally, in the same direction is working an increase in the number of central banks with which The People's Bank of China has agreements on swap lines for foreign exchange, as well as the accelerated development of the offshore Yuan market. An important moment will be the expected changes in the Chinese exchange rate regime, since the end of pegging RMB to a basket of currencies and the transition to an inflation-targeting regime could lead to a larger part of Asia following China that is using its currency more intensively. Additionally, although currently exclusively for domestic use, China's central bank's digital currency will eventually facilitate the international use of the renminbi. Consequently, it can be concluded that in the coming decades, the dollar will continue to play a predominant, but not, as it has been, an exclusive role in the international monetary order.

Digital currencies, monetary sovereignty, and U.S.–China power competition

AbstractThe rise of digital currencies challenges practices of monetary sovereignty and impacts the international monetary order. Drawing on recent IPE debates about the public‐private nature of money, the critique of the “impossible trinity” and “territorial currencies,” this article explores the competition between China and the United States over and within the international monetary system. The two largest economies display strikingly divergent regulatory approaches to cryptocurrencies and Central Bank Digital Currency (CBDC). China completely banned cryptocurrencies but became a front‐runner in developing a CBDC. It aims to expand the RMB's global role without giving up its monetary control. U.S. administrations have instead reluctantly considered regulating cryptocurrencies. Discussions on a potential digital U.S. dollar (USD) only began in 2020. Washington aims at preserving the existing cross‐border financial mechanisms and offshore infrastructure for USD‐denominated transactions and credit creation. It focuses on financial crime and maintaining the innovation dynamic of its private sector to preserve its “exorbitant privilege.” Emerging financial infrastructures and standards for digital currencies are the new technological arena for U.S.–China monetary competition.

Кризис бреттон-вудской валютной системы и начало европейского валютного сотрудничества

The article aims to identify the impact of the crisis of the Bretton Woods monetary system on the beginning of European monetary cooperation. Russian scholars' publications on European monetary integration usually examine in detail the internal prerequisites for the emergence of the Werner Plan and only sketch the external environment. Drawing on available European and American sources, this research provides a more nuanced picture of the origins of European monetary cooperation in the context of a general collapse of the post-war international monetary order. The article begins with the characteristic of the main features of the Bretton Woods monetary system. In the late 1960s and early 1970s, the intrinsic contradictions of the Bretton Woods mechanism, such as the problem of liquidity, confidence in the key currencies, and the adjustment mechanism, generated numerous monetary crises. All efforts to reform the international monetary system stalled because of disagreements between countries with surplus and deficit payment balances. The research also focuses on the US monetary policy. As the US dollar was the main reserve currency, the stability of the entire monetary system depended on its position. Since the late 1960s, conflicts over monetary issues developed between the United States and Western European countries, culminating in the Nixon administration's unilateral decision to abolish the gold standard in August 1971. Monetary crises and the weakness of the dollar pushed the countries of the European Economic Community to develop their own currency grouping. The article analyses the Werner Plan of 1970 that proposed the creation of an Economic and Monetary Union (EMU) with a single European currency as the ultimate goal. Based on fixed exchange rates between European currencies, the EMU represented a regional replica of the Bretton Woods system. The single European currency was seen by Europeans as an alternative to the dollar and the unpredictable American policy. The author concludes that the end of transatlantic monetary cooperation gave an additional impetus to the development of European monetary integration. Although first European efforts to create the EMU had failed because of the different approaches of France and the Federal Republic of Germany as well as the economic crisis of the early 1970s, the Werner Plan marked a crucial phase in the history of European integration. The Werner Report became a blueprint for the European Monetary System (EMS) of the late 1970s. The success of the EMS paved the way for the creation of the European Monetary Union envisaged in the Maastricht Treaty of 1991 establishing the European Union and the adoption of a single European currency - the euro.

ABOUT THE LEGAL RESPONSIBILITY OF THE CENTRAL BANK IN MONETARY LAW

The subject of the analysis in this paper is to identify and evaluate the concept of central bank legal responsibility in the contemporary monetary law. In this regard, the research focuses on issues related to the need of clarifying and defining the nature, type and extent of central bank liability and compensation mechanisms for damage that may be caused to third parties in the implementation of the transferred lex monetae in practice. The first part of the paper focuses on the axiological and dogmatic analyses of the legal framework of the central bank, which is governed by the national monetary legislation sui generis, and the interpretation of different legislative solutions in the practice of comparative monetary law in the area of responsibility and legal protection of the central bank. The subject of special interest of the authors is the monetary-legal analysis of the relevant provisions of the Law on the National Bank of Serbia, since in their opinion, a clear determination of the responsibility of the supreme monetary institution is a precondition for its credibility, not only in national but also in the international monetary order, and a conditio sine qua non of creating a reputable and consistent national monetary jurisdiction.

Ages of financial instability

Starting from the mid-nineteenth century, this paper analyzes two periods of financial instability connected with financial globalization. The first culminates with the 1929 crisis, while the second characterizes the more recent experience starting from the 1970s. The period in between is divided into two subperiods. The first goes up to World War II and sees a retrenchment from globalization and the affirmation of a statist approach to national policy autonomy. The second subperiod, marked by the new international monetary order and limited globalization, although appearing as a relatively calm interlude, conceals the seeds of a renewed push toward financial fragility. The above periods are synthetically analyzed in terms of the development and mutual fertilization of theories, institutions, and vested public and private interests. The narrative is based on two interpretative keys: the Minskyan theory of financial fragility and changes in the public-private partnership, mainly with reference to the financial sector for which the role of the State as the guarantor of last resort necessarily ensues. The lesson is that a laissez-faire approach strengthens asymmetric powers and financial instability, rendering it extremely difficult and socially costly for the State to comply with its role of financial guarantor.

Ages of Financial Instability

Starting from the mid-nineteenth century, this paper analyzes two periods of financial instability connected with financial globalization. The first culminates with the 1929 crisis, while the second characterizes the more recent experience starting from the 1970s. The period in between is divided into two subperiods. The first goes up to World War II and sees a retrenchment from globalization and the affirmation of a statist approach to national policy autonomy in pursuing domestic goals, for which we take as examples the New Deal, financial regulation, and the new international cooperative approach finally leading to Bretton Woods. The second subperiod, marked by the new international monetary order and limited globalization, although appearing as a relatively calm interlude, conceals the seeds of a renewed push toward financial fragility. The above periods are synthetically analyzed in terms of the development and mutual fertilization of theories, institutions, and vested public and private interests. The narrative is based on two interpretative keys: the Minskyan theory of financial fragility and changes in the public-private partnership, mainly with reference to the financial sector for which the role of the State as guarantor of last resort necessarily ensues. The lesson that can be derived is that a laissez-faire approach to globalization strengthens asymmetric powers and necessarily leads to overglobalization, as well as to financial and economic instability, rendering it extremely difficult and socially costly for the State to comply with its role of financial guarantor.

Uneven and combined globalization

The restructuring of capitalism involved profound changes in the way companies operate, in the integration of markets and in the sphere of state sovereignty. Economic globalization has intensified competition between companies, workers and nations. The hierarchical, dollar-led international monetary order has boosted uneven and combined development. The aim of this paper is to stimulate reflection on contemporary capitalism from the perspective of political economy. The dynamics of financial flows and the increase in wealth stocks have had impacts on macroeconomic management, job creation and income distribution in developed countries. The early deindustrialization of Latin American economies and the consistent industrialization of Asian economies altered the international division of labor and differentiated the capitalist periphery. The financialization of wealth and the empowerment of rentierism have constrained most governments to work towards full employment and social protection. The widespread global value chains and the redefining of the pattern of competition by large corporations have negatively affected unions and the labor market, increasing unemployment (even if in disguise) and precarious labor relations.

REGULATORY SCOPE OF SIX PACK IN EUROPEAN MONETARY LAW

The subject of the analysis in this paper is the analysis and assessment of the regulatory reach of the Six Pack in the monetary law of the European Union. In this respect, the emphasis of the research is on issues related to the need of coordination of the concepts of economic policy of the Member States at the supranational level as a prerequisite for the effective European monetary law and functions and tasks established by the European Semester as the new institutional mechanism of coordination created in the conditions of the global financial crisis. In the further text, the focus of research is on the objectives of the regulations and directive within the Six Pack, which have made the most serious changes to the monetary laws of the Member States and established new competencies of the European Commission and the European Court of Justice in the field of monetary stability, where the general conclusion is the need for their active role in applying the concept of a European semester in order to preserve legal security and ensure the acquest of the international monetary order.

Monetary Power Reconsidered: The Struggle between the Bundesbank and the Fed over Monetary Leadership

AbstractThis article reexamines the theory of monetary power to explain the role of the Bundesbank (and Germany) in the emergence of the rules-based low-inflation regime in the late1980s and early 1990s. Our theory of monetary power draws on the notion of institutional power and the concept of monetary leadership, understood as the capacity to attract foreign investment, and thereby explains how domestic institutional features and contingent historical events affect countries’ external monetary power. This theory is employed to trace how the Bundesbank go-it-alone strategy in 1989 triggered a cross-national sequence of events that changed the international monetary order in a way that was consistent with the German interests. The transition was marked by a shift from the US-led pragmatist approach of international macroeconomic coordination to a rules-based approach founded on the principle of low-inflation–targeting. The article argues that this change took place despite the opposition of the Federal Reserve System (Fed) and the US Treasury. The article contributes to the literature on the decline of US hegemonic power as well as the literature on the mechanism of institutional change at the international level. It also sheds new light on current debates about the putative decline of the rules-based world order.

Evolutivni koncept lex monetae u međunarodnom i evropskom monetarnom pravu

The subject of analysis in the paper is the examination of the application and derogation of the contemporary international and European monetary law principles. In this context, the first part of the paper points to the specificity of the subject of legal regulation of international monetary relations and examines the normative features of the international monetary system. The second part of the paper points to the basic postulates of international monetary law, embodied in the principles of traditional lex monetae and lex contractus, with particular emphasis on the application of these principles in globalized financial flows. The subject of the analysis is to identify the new wave in development of the legal regulation of monetary relations, as well as the role of International Monetary Fund in the process of money regulation, which, according to the author, has significant implications not only for preserving the acquis and values of the international monetary order, but also for the maintenance of internal monetary stability.

In search of a unit of stable global purchasing power

This paper introduces an improved version of the "World Currency Unit" (Ho, 2000), a synthetic unit of account representing constant real purchasing power. If commodity prices and bonds are quoted in this unit while allowing settlement in any currency, real prices and real interest rates will become more transparent. We show that the real prices of commodities are sensitive to movements in the nominal exchange value of the US dollar, and that they are Granger-caused by movements in the US dollar's nominal effective exchange rate. The proposed unit has implications for efficiency and the stability of the international monetary order.

Who are the First Users of a Newly-Emerging International Currency? A Demand-Side Study of Chinese Renminbi Internationalization

Who are the first users of a newly-internationalizing currency? This issue, crucial to understanding the dynamics of the emergence of a new international monetary order, remains long underexplored in the existing literature, which tends to adopt a supply-side approach analyzing mainly the international currency issuers. Our study addresses this important question, with a focus on the case of the Chinese renminbi, by employing a demand-side approach examining the international currency users through generalized ordered logistic regression analysis. Our primary argument is that a state hosting a major global financial center—a condition largely independent of influence from countries issuing international currencies—is likely to be more interested in enhancing its use of the renminbi, implying thereby that global financial institutions and the related inter-state rivalries among international currency users may play crucial roles in the shaping of a new international monetary order. We in addition find significant impacts on a state’s interest in renminbi use resulting from its institutional economic cooperation with China through a preferential trade agreement or a bilateral investment treaty, but that a country’s mere trade and investment integration with China does not meaningfully affect its government’s support for renminbi use.

Institutional Implications of the Rise of a Debt‐Based Monetary Regime in Europe

AbstractThis article deals with the institutional implications for the European Union resulting from debt relations. It suggests that despite original efforts to tame them, as a consequence of a series of events both in the international monetary order and the European integration process, power games lying behind debt relations have finally sprouted – with special virulence after the great recession. Although the causes have been brewing for a long time (in this regard the end of the monetary order established at Bretton Woods and the liberalisation of capital movements have been key factors), it is only in the post‐economic crisis context that concrete examples of debt‐based power games are observable in the institutional system. In hindsight, a line can actually be drawn tracing a transformation in the principle underlying EU constitutional law and its institutions: from promoting equality among its Member States to reflecting their (now persistent and increasingly divergent) economic power.

Towards a Case for a Second American Revolution

I. CONTEXTI think it must also be admitted that there are cases in which revolution is justifiable- Bertrand Russell, 19491.1 INTRODUCTION: A CRITICAL JUNCTUREHistorical context - As a comparatively young nation, the United States has been through many important developments since independence was first declared in 1776. Since then the colonies won a revolutionary war against Britain, ratified a new constitution, fought a civil war and abolished chattel slavery, extended its territory to the Pacific Ocean, expanded the right to vote, underwent an industrial revolution, took on corporate monopolies and political machines during the progressive-populist era, experienced the 'Roaring Twenties' followed by the Wall Street crash and the Great Depression, and fought in two World Wars before emerging as the most powerful country on earth.U.S. international relations in the decades following World War II were largely overshadowed by the Cold War. Prominent institutions during the post-war era include the Bretton Woods international agreement, the gold monetary standard, Keynesian economic policies, a mixed economy (notably in Britain) and the Glass-Steagall firewall separating commercial from investment banking. The post-war era in the United States has come to be known as the 'golden age of capitalism' characterized by egalitarian income growth coupled with high levels of financial-sector stability.However, a constellation of events in the 1970s-the breakdown of the Bretton Woods international monetary order, rising inflation and unemployment, stagnating economic growth, and two major oil shocks- set the stage for a major paradigm shift towards the era of neoliberal globalization. In theory, neoliberal ideology is characterized by the doctrine of neoclassical supply-side economics and its various policy objectives: privatization of state-owned assets and social services, liberalization of trade and finance, deregulation of business activity, the weakening of labor unions, and the minimization of macroeconomic imbalances such as inflation, debt and deficits.Early signs of the onset of neoliberalism can be found in events such as the early assault on California's system of higher education by then governor Ronald Reagan, the rise of Pinochet in Chile in 1973 and the passage of Proposition 13 in California in 1978. However, the election of British premier Margaret Thatcher in 1979 and U.S. president Ronald Reagan in 1980 set the stage for a definitive paradigm shift towards neoliberalism (Levy, Kagan & Zysman 1997; Campbell 1998; Sisson & Hartmann 2014, 220).Backed by the Washington Consensus, neoliberalism became a globally dominant economic system, especially after the fall of the Soviet Union in 1989. During the neoliberal era, the IMF and World Bank, using structural adjustment loans and abutted by various forms of U.S. intervention and diplomatic pressure, were able to pressure many developing countries to adopt neoliberal policies. Meanwhile, global competition has pressured many countries in the developed world to adopt neoliberal reforms as well, although the extent to which European and Japanese capitalism is converging on the more liberal variety practiced in the U.S. and Britain has been the subject of ongoing debate among comparative political economists.Critical juncture - The era of neoliberalism coincided with many years of economic growth in the United States and in several regions of the developing world, especially Asia. Despite this, in the United States and beyond an extensive list of policy problems (enumerated below) have become increasingly apparent. Indeed, one can reasonably posit that the United States today stands at a critical juncture in its historical development, a situation itself embedded in a larger global critical juncture. For instance, referring to the current global ecological crisis, political scientist Manfred Steger observes, Humanity has reached yet another critical juncture-the most important in the relatively short existence of our species (Steger 2013, 136). …

Towards a New International Monetary Order

Towards a New International Monetary Order

O BRASIL E O FMI DESDE BRETTON WOODS: 70 ANOS DE HISTÓRIA

O objetivo deste ensaio histórico é o de acompanhar o relacionamento do Brasil com o FMI, no contexto da evolução do sistema monetário internacional, desde Bretton Woods até a atualidade. O ensaio começa por retraçar o itinerário do FMI, com destaque para a mudança de padrão cambial em 1971, e segue com o exame das relações entre o Brasil e a instituição, com ênfase nos acordos contraídos sob diferentes políticas econômicas e em momentos diversos de crises nas transações externas; o primeiro acordo foi rompido por razões políticas em 1958, e o mais recente, de 2003, foi suspenso em 2005, antes de sua conclusão, também por motivos políticos. São destacados os problemas enfrentados pelo FMI no período – estabilidade cambial, liquidez, monitoramento das economias nacionais – e as circunstâncias que levaram o Brasil a contrair seus muitos acordos com a instituição. O País manteve uma relação errática com o FMI, com aproximações e distanciamentos ao longo do período, oscilando entre uma postura cooperativa – no início e durante a maior parte do regime militar, bem como no final dos anos 1990 e início do novo milênio –, e uma outra de rejeição ou confrontação – no governo Kubitschek e na redemocratização –, finalizando por uma passagem da situação de devedor dependente, na maior parte desse longo período, a uma de credor e demandante por reformas na instituição, na fase recente, quando o País busca aumentar seu poder de voto nas instituições de Bretton Woods; uma tabela final lista os acordos concluídos pelo Brasil com o FMI e os valores envolvidos em cada um.